Developing purposeful organisations

Strategy

In recent months I’ve been publishing articles elsewhere on the web rather than this blog. I thought it would be a good idea to keep everything joined up, so here are a few things I’ve been writing about.

This is one of those books that you read and then wish you’d read years ago. I thought it was going to be full of examples of quirky management practices, but it’s actually based on a huge 10 year research project into company culture and leadership.

The authors have a very simple five-stage model of company culture which I think is extremely useful. Rather than focussing on a set of behaviours as most culture change folks do, the authors look at the language that individuals use in the company to determine what stage they are at. The goal is to lift individuals, one stage at a time up to stage 4, with ‘peak’ moments of stage 5.

As you read about these five stages, think about where your culture is at the moment. And also note that people tend to think their culture is at least one stage ahead of where it really is. They key thing is to listen to the language people use.

Stage 1. “Life sucks”

This is where life at work is so bad that people can’t even imagine that things could be better or that they could be happy. Think Enron on the verge of collapse, or the disaffected employee who turns up to work with a shotgun. Fortunately it’s pretty rare for individuals or entire cultures to be at this stage.

Stage 2. “My life sucks”

The big difference as people drag themselves out of stage 1 is that there is hope. They can see that life could be better, but often use language around why they are having a tough ride, the barriers in their way or why other people are getting all the breaks. Think The Office or the movie Office Space. Dysfunctional, broken and demoralising with a feeling of “why is this happening to me?”

Stage 3. “I’m great”

This is the most common stage for companies that are performing well. People are positive and achieving results, but if you listen carefully to their language it’s all about them. When they talk about work, it’s mostly “me” and “I”. The subtext to ‘”I’m great” is “…and others aren’t.” It’s all about them hitting their targets; how they are building their own career; and how they are beating the competition inside and outside the company. People protect information, contacts and other assets to keep their ‘edge.’ Stage 3 companies can do well, but they are a long way from optimal. I found this interesting as often we unwittingly design companies to only reach stage 3, for example with very individualised targets, objectives and evaluations – all that matters is that YOU are doing well, and we hope that means the company as a whole will be performing well. We’re encouraged to write resumes that talk about ‘my achievements.’ Also, most personal development books (the famous Getting Things Done springs to mind) are all about YOU: Tips, tricks and hacks to ‘get ahead.’

Stage 4. “We’re great”

This is where the magic starts to happen, as people realise that the job of creating truly outstanding results is beyond any one individual. The language changes from “me” and “I” to “we” and “us.” When people talk about work they talk about the results that the team or company is getting. People actively share contacts and information and a culture of collaboration is established where the whole becomes greater than the sum of its parts.

Stage 5. “Life is great”

At stage 5, something important about the nature of competition changes. It’s when the group is committed to a higher purpose beyond making money, and a set of values which set their standards for ethics and behaviour (what they will and won’t do in order to fulfil their higher purpose.) For example, a pharmaceutical company where people talk about the ‘competition’ or ‘enemy’ being cancer or HIV, rather than a rival firm. In comparison to the real challenge of fulfilling their higher purpose, external competition just seems mundane. This level of peak performance is difficult to sustain, but the best companies are stable at stage 4, and have peak moments where they achieve stage 5. Steve Jobs’ team at Apple when they were working to bring previously unimaginable computing power into the home to enrich people’s lives with the first Macintosh computer is another example.

Moving up through the stages

The book offers tips and ideas to spot what stage individuals are at and how to raise them up through the different stages. A key insight is that you have to move people one stage at a time. If you replaced the boss David Brent from The Office with Steve Jobs and tried to immediately get everyone to world-changing teamwork and performance, it would be too much too soon. People need to be moved one stage at a time. For example, having a colleague who’s at stage 3 provide coaching and help to someone at stage 2 so they can start to get some personal results. And once you have a dominant stage 3 culture, begin to set tasks for individuals that are impossible to achieve alone, so that they start to realise collaboration is the only way to achieve outstanding results. Perhaps many culture change projects fail because they try to move too quickly to the optimal and don’t take people on a journey.

Tribal Leadership and strategy

The book also offers a very simple and powerful model for creating strategy that high performing groups will buy into and actually execute. This is a great example of democratic planning. Everything starts with the higher purpose of the company within the constraints of its values. Yet more evidence that ‘higher order’ clarity in a company is the foundation of success.

In a nutshell, the planning process defines ‘outcomes’ (subtly but importantly different from goals in that it’s about the journey as much as the end result.) The group then looks as what assets they already have to help them achieve the outcomes (technology, relationships, brand etc) and decides if the assets are sufficient. If not, then the strategy is re-framed with new outcomes to create the required assets. Once the assets are sufficient, the group then defines behaviours – things they will actually do – to use the assets in order to achieve the outcomes. Members of the group volunteer to take responsibility for each behaviour enthusiastically because they know that they already have the ingredients for success.

With this approach, you notice how a leader acts as an instigator and facilitator for this process, but it’s the group that actually produces the plan and takes responsibility, without the need for old-fashioned delegation. It’s easy to see why the companies that the authors studied who work in this way tended to produce better plans that the people bought into and actually put into motion.

When you’re creating a new venture or planning a project within an existing business, thinking about stakeholders – groups of people who are affected by the project – is a useful way to work through the impact of what you’re going to do.

A typical list of stakeholders is: employees, customers, investors and suppliers. Sometimes ‘community’ is thrown in by more socially conscious businesses too. Companies are encouraged to listen to and ‘engage’ all of their stakeholders to reach good outcomes for everyone.

The crucial missing stakeholder from this list is future generations. These people have no voice today because they’re not born yet and so cannot be ‘engaged’ in any way, but they are completely beholden to our decisions, actions and the legacy we leave them. This is particularly true of the environmental impact of business today, the outcomes of which affect future generations far more than they affect any other stakeholders today.

Assessing the environmental impact of a project is nothing new, but there is something powerful about putting a human face on it. For me it becomes more powerful to talk about outcomes for future generations than something abstract like ‘carbon footprint.’ This is especially true because every single one of the other stakeholders will one day come out of the future generations group, so if a business is to survive long-term then looking after their interests is essential.

Take waste for example. Our planet is a closed system. Except for the odd spacecraft, nothing leaves the planet. There is no such thing as throwing waste ‘away’ because there is no ‘away.’ When we burn waste and add carcinogenic heavy metals into the atmosphere or bury polluting waste in landfill sites we’re simply leaving it for future generations to deal with. This is as unacceptable as dumping it in the front gardens of people living today but of course we’d never do that because it would affect us right now, and people today have a voice and would rightly complain. Future generations are powerless today and can only be treated fairly if we consider the impact on them today.

Next time you’re working on a stakeholder analysis, try adding future generations to the mix. The base level is reducing harm to them down to zero, but a whole world of possibility opens up when you consider how you could actually enhance positive outcomes for future generations just like you try to create positive outcomes right now for the other stakeholder groups like employees and customers.

There’s a wonderful vision of the future in the iconic design book Cradle to Cradle. The authors envisage a future where homes and other buildings are more organic and actually purify and enhance the environment around them. They use the analogy of buildings being like trees and cities like forests, with air and water coming out cleaner than when it came in. Further, in the future we could design products that can be endlessly ‘upcycled’ into equal or better products (rather then recycled which generally means ‘downcycled’ into lesser products until the materials can be reused no more.)

Sounds far-fetched? Big companies like Ford, Herman Miller, Nike and Walmart are taking the Cradle-to-Cradle philosophy seriously and whilst they have a long way to go, they are on the path towards realising this future. And it all stems from thinking and caring about the voiceless stakeholder group of future generations.

It uses Google-inspired logic. For example, Google make it very easy to take your data out of GoogleDocs and import it elsewhere. Unlike Microsoft with its archaic proprietary formats, Google never try to keep anyone as a customer by locking them in. Clearly this benefits the customer, but it’s also to Google’s advantage too. It forces them to focus on product innovation and customer satisfaction since users can easily move to a competitor at any time. This internal focus on constant improvement keeps the product at the sharp end, and they have a very direct feedback loop with customers because they know that if they´re retaining them then they must be doing a good job. Compare this to MS Word which has barely evolved in years and survives only because of its ubiquity, all the while being threatened by the rapidly improving Googledocs.

So I was wondering how you could apply this to a cafe/restaurant. One of the ideas I’d previously been thinking about is a monthly subscription so that customers can eat a certain number of daily specials for lunch each month or have the same amount taken off other meals.

This would be convenient and good value for regulars. But it kind of locks people in, which of course is the goal of most loyalty schemes. Perhaps people would use the subscription because it’s good value for price but it wouldn’t force quality and innovation to continually improve and it could make the place lazy and boring, at risk of disruption by a new competitor.

So I thought, how about allowing customers to use their credit at ANY cafe in the city for exactly the same value (the most basic way to do this would be to refund receipts from other cafes although that´s a bit clunky – I’m sure there would be a smoother way.)

Allowing your hard-won subscription revenue to go to competitors flies in the face of conventional logic, but I love the feedback loop it would create: Every month I could measure the percentage of the subscription that was being used in MY cafe to see if we’re doing a good job. We’d never take a subscriber’s business for granted and only make money by ensuring we were the place they come back to the most often, voluntarily. It would send a strong and different message to customers that we don’t just appreciate that they have a choice about coming to us, we actually give them MORE choice by promoting disloyalty.

We shouldn’t judge a company based on the views of one disillusioned employee. This post isn’t really about Google, I’m just using something he says to make a wider point. The part that got my attention was this:

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus [trying to beat Facebook and avoid losing the Internet advertising crown].

So what kind of company is Google? An ad company or a tech company? Of course it’s both – they use tech to ‘organise the world’s information’ and generate revenue through advertising. But one trickles down from the other. Tech is what Google is really about. All great companies focus on something higher and if you get that right then profits follow.

When you have an incredibly strong competitor (or you’re just going through a period of bad financial results), it’s so tempting to say ‘SHIT we are losing profit. How can we make more profit?’ But this kind of thinking stifles what really matters – focussing on the mission, innovating and then delivering.

The blog post says that Google has failed to create an exodus from Facebook. I can’t see how they ever will if they try to chase Facebook’s ad dollars and catch up. The focus is in the wrong place.

It seems Google is on the defensive now as the incumbent against the up-start, just as it once was the up-start against Yahoo and Microsoft. Google got ahead of these competitors by doing something new and different, not playing them at their own game. And it did this by having a clear and simple mission which it followed.

The lesson here for all companies is that when you find yourself chasing profit (or a particular competitor,) you’re operating at the wrong level. You need to look higher at the mission and focus on creating a strategy for meeting it. This can lead to innovation that leapfrogs the competition and creates completely new markets, exactly as Google once did and Facebook is doing right now.

Let’s not get into a discussion about Google’s strategy around social networking – there’s plenty of that on the tech blogs. But what do you think about where you should put your attention if you want to build a profitable company?